AUE2602
, PART A – CORPORATE GOVERNANCE MATTERS
QUESTION 1
With reference to the Board of directors’ section comment on:
a. the composition of GH (Pty) Ltd’s Board of Directors:
- The governing body should comprise a balance of power with a majority of non-executive members. Of the eight directors, five are executive directors
and three are non-executive directors. Therefore, they do not comply with principle 7 point 8 of the King IV Report.
There should be a majority of non-executive directors and the majority of the nonexecutives should be independent.
Amount the non-executive members:
- Hezekiel Sepeng is a shareholder in the largest customer for the firm. Hence not independent.
- Alind Parvej is a recently retired financial director. Hence not independent.
- Ally Lane is a partners in a law firm contracted by the company. Therefore cannotbe regarded as independent.
It follows that none of the members of the board are independent.
Based on the Board structure as stated, there is no indication that a lead independent director has been appointed, since the chairperson is not
independent.
Matt Damond, the chair of the board, is not an independent non-executive director as recommended by the King IV Report, principle 7 point 31. As the
chair is not independent, the King IV Report, principle 7 point 32, recommends that in the case where the CEO and chairman is the same person, the
board should appoint a lead independent non-executive director to act as chairman when any situation of conflict of interest arises for the chairman.
Every board should consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical
expertise, relevant knowledge of the industry, experience, nationality, race, age and gender. (principle 7 point 10).
The board does not appear to be diverse in terms of gender, since Ally Lane is the only female on the board.
The governing body should comprise a balance of power with a majority of non-executive members. Of the eight directors, three are executive
directors and five should be nonexecutive directors to comply with principle 7 point 8 of the King IV Report.
Every board should consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical
expertise, relevant knowledge of the industry, experience, nationality, race, age and gender. (principle 7 point 10) .
b. whether GH (Pty) Ltd can appoint the Board committees according to the membership requirements, as recommended by the King IV Report on
Corporate Governance for South Africa:
The King IV Report (2016:53-57)
The nominations committee – Cannot be appointed
The nominations committees should consist only of non-executive directors of whom the majority should be independent
(P8RP61 & P8RP66): (0.5)
It is recommended that each committee have a minimum of three members (P8RP46)
Currently with none independent non-executive director, the majority of the members of the nominations committees will not be independent non-
executive directors.
The Risk committee – can be appointed
The risk committee should have a majority of non-executive directors as members, (principle 8, point 64) . Three of the members are non-executive
directors; therefore, they can be appointed to comply with the principle.
The risk committee should have a minimum of three members but there is no limit to the number of members (principle 4.3, point 21).
Remuneration committee – can be appointed
All of the members that make up this committee should be non-executive directors; of which a majority should be independent.
(principle 8 point 66)
The chairperson should be an independent non-executive director.
, PART A – CORPORATE GOVERNANCE MATTERS
QUESTION 1
With reference to the Board of directors’ section comment on:
a. the composition of GH (Pty) Ltd’s Board of Directors:
- The governing body should comprise a balance of power with a majority of non-executive members. Of the eight directors, five are executive directors
and three are non-executive directors. Therefore, they do not comply with principle 7 point 8 of the King IV Report.
There should be a majority of non-executive directors and the majority of the nonexecutives should be independent.
Amount the non-executive members:
- Hezekiel Sepeng is a shareholder in the largest customer for the firm. Hence not independent.
- Alind Parvej is a recently retired financial director. Hence not independent.
- Ally Lane is a partners in a law firm contracted by the company. Therefore cannotbe regarded as independent.
It follows that none of the members of the board are independent.
Based on the Board structure as stated, there is no indication that a lead independent director has been appointed, since the chairperson is not
independent.
Matt Damond, the chair of the board, is not an independent non-executive director as recommended by the King IV Report, principle 7 point 31. As the
chair is not independent, the King IV Report, principle 7 point 32, recommends that in the case where the CEO and chairman is the same person, the
board should appoint a lead independent non-executive director to act as chairman when any situation of conflict of interest arises for the chairman.
Every board should consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical
expertise, relevant knowledge of the industry, experience, nationality, race, age and gender. (principle 7 point 10).
The board does not appear to be diverse in terms of gender, since Ally Lane is the only female on the board.
The governing body should comprise a balance of power with a majority of non-executive members. Of the eight directors, three are executive
directors and five should be nonexecutive directors to comply with principle 7 point 8 of the King IV Report.
Every board should consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical
expertise, relevant knowledge of the industry, experience, nationality, race, age and gender. (principle 7 point 10) .
b. whether GH (Pty) Ltd can appoint the Board committees according to the membership requirements, as recommended by the King IV Report on
Corporate Governance for South Africa:
The King IV Report (2016:53-57)
The nominations committee – Cannot be appointed
The nominations committees should consist only of non-executive directors of whom the majority should be independent
(P8RP61 & P8RP66): (0.5)
It is recommended that each committee have a minimum of three members (P8RP46)
Currently with none independent non-executive director, the majority of the members of the nominations committees will not be independent non-
executive directors.
The Risk committee – can be appointed
The risk committee should have a majority of non-executive directors as members, (principle 8, point 64) . Three of the members are non-executive
directors; therefore, they can be appointed to comply with the principle.
The risk committee should have a minimum of three members but there is no limit to the number of members (principle 4.3, point 21).
Remuneration committee – can be appointed
All of the members that make up this committee should be non-executive directors; of which a majority should be independent.
(principle 8 point 66)
The chairperson should be an independent non-executive director.
